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How To Use a Self Directed IRA To Invest in Real Estate

If you are seeking out information on how to use a self-directed IRA to invest in real estate in 2024, you are on the right path. This is because it’s common for most people to build their retirement funds with an IRA that’s invested in mutual funds, stocks, bonds, and the like, but there’s an even better way that will ensure your nest egg is completely secure and maximized – it’s called a self-directed IRA, and it can be used to invest in real estate.

Your interest may be sparked, and you’re wondering…

How do you use a self-directed IRA to invest in real estate in 2024? First, if an investor’s retirement funds are not currently in a self-directed IRA, they would need to utilize a specialized self-directed individual retirement account custodian who can move their funds into an SDIRA for them. Second, once the account has been established, the real estate investor presents the proposed property to the custodian for approval. However, the investor can move forward with a purchase without custodian consent if there is an SDIRA LLC structure. 

Let’s dive in to get a well-rounded view of using a self-directed IRA to invest in real estate:

What is a Self-Directed IRA?

A self-directed individual retirement account is an alternative version of a traditional IRA in which the investor is not restricted to typical IRA investments such as stock, bonds, CDs, and mutual funds. The self-directed IRA, instead, allows for a broad range of investment avenues. This may include investing in real estate, precious metals, oil, gas, promissory notes, cryptocurrency, and more. A self-directed IRA gives an investor more control over their funds, to invest as they see fit.

Advantages of Using a Self-Directed IRA to Invest in Real Estate

There are many benefits to using a self-directed IRA to invest in rental properties in 2024. The most notable benefits are having control over what your retirement funds are being invested into, as well as the opportunity to keep your nest egg safe, and the chance to grow your funds beyond what a regular IRA could. Let’s take a look at these, and a few more, in detail.

1. Using a Self-Directed IRA Allows for More Control Over Your Investment Decisions

When you have your funds invested in a traditional IRA, you give away a large degree of control as to what you invest in. The control is passed over to a brokerage house, insurance firm, a bank, and the like. They typically only invest your retirement funds into a limited number of items, which makes a diversified portfolio not obtainable. In a situation like this, you are limited to investing in stocks, bonds, mutual funds, and similar items. This limits your investment opportunities, and prevents you from maximizing your retirement funds.

How do you use a self directed IRA to invest in real estate

This is what makes a self-directed IRA so advantageous. It gives you control over your own money and puts you in the driver’s seat. If you are a savvy investor, isn’t it wise to put your knowledge into action, instead of relying on someone you don’t even know to take care of your entire life’s savings!

Using a self-directed IRA to invest in real estate in 2024 can actually provide you with many investment opportunities. Here are just a few:

  • Rental Real Estate
  • Tax Liens
  • Precious Metals Such as Silver and Gold
  • Oil & Gas
  • Raw Land – Learn more about how much you can make by investing in land through this course on generating cash flow from land, by our friend Jack Bosch.
  • Coffee
  • Livestock
  • Race Horses
  • Cryptocurrency – dive into my other post that covers how to invest in crypto without paying taxes on each and every trade – Adding Crypto to Your Portfolio with an SDIRA.

It’s clear that investing with a self-directed IRA can offer you the opportunity to create a more diversified portfolio. This, in turn, can allow you to deal with investments that you may have more knowledge on, or feel more comfortable with. For instance, if you are a real estate investor, it just makes sense to invest your retirement funds in rental properties, as opposed to stocks and bonds. This way, you call the shots and put your experience into action.

Add Even More Control Over Your Investments By Incorporating

Additionally, if you create an LLC structure where your investments are held within an LLC, that’s within your IRA, you will gain even more control. This particular setup allows you to skip the custodian approval process. You will no longer have to ask for permission to invest in a certain item. You have check control when you purchase through your LLC, giving you the ability to just move forward with purchasing the property you feel is best.

Almost all our customers invest through an LLC setup. It not only gives them more control and protects their assets, but also creates significant tax advantages. To ensure the setup is correct, we recommend utilizing our attorney Garrett Sutton, from Corporate Direct. He’s one of the Rich Dad Advisors to real estate giant, Robert Kiyosaki, so he is an excellent resource to have in your pocket. You can also read more about tax advantages in our latest article titled: Top 3 Tax Benefits of Real Estate Investing that Will Save You Money.

2. If the Stock Market Crashes Your Investment Won’t Lose Money

If your retirement funds are locked up in a regular IRA, then your money is at the mercy of the stock market. If there is a downward turn in the market, you could lose nearly all of your life’s savings. For instance, what if you were set to retire in a certain year, you have a good nest egg in your IRA, and then…an economic crisis occurs, and the stock market plunges that same year. You are then faced with the fact that you might have to continue working because you may not have enough to retire on.

The market crash that took place because of the coronavirus pandemic caused some to lose hundreds of thousands of dollars. Is it worth the risk? Certainly not. Your retirement fund is too important to place in such a risky environment. We did an interview with a real estate investor that touches on this topic. It talks about how our customer, Jarret, was able to invest in real estate to recession-proof his investments to maximize his retirement funds.

With a self-directed IRA, your funds can be safe and secure in an asset that you control. If the stock market crashes, your retirement funds will not change; in fact, they will just keep growing. This is because no matter how bad the economy gets, everyone still needs a place to live. That’s where your rental property comes into play. While everyone else is losing thousands, your rental checks will still come in every month, like clockwork.

You can read more about just how much you can lose in the stock market, in this article we put together on the subject: Why Investing in Real Estate is a Smarter Money-Making Strategy. It contains some useful videos on the topic, as well.

3. Allows for More Purchasing Power Through Co-Investing

Using a self-directed IRA to build up your retirement funds enables you to invest in financially “out of reach” properties. This is due to the fact that co-investing is permitted. So, if you’re looking into a lucrative rental property in 2024, and know you won’t have all the funds to buy it, you can purchase the property with another investor that uses his or her SDIRA also. Partnering in this way can open up great opportunities to build your portfolio, as well as your nest egg.

Be aware that there are some rules as to who you can and cannot invest with. Each of your lineal descendants is considered a disqualified person. Therefore, you may not buy, sell, or lend to or from them. You can, however, co-invest with them if you purchase a rental property with your self-directed IRAs from a third party person.

4. Significantly Increases Your Retirement Funds

Because of the fact that you are allowed to use your self-directed IRA to invest in real estate, this alone will greatly increase your retirement funds, more so than if you were to only invest in typical stocks and bonds. Rental properties are known to be the most lucrative investments. Additionally, rental real estate produces a steady cash flow that gets poured into your self-directed IRA every month. Plus, this money grows tax-free until you withdraw it during your golden years.

You will also be able to take advantage of certain tax write-offs that you would not be eligible for when investing in stocks and bonds. All this comes together to bulk up your nest egg, ensuring a comfortable retirement.

To increase your wealth in general, we recommend reading this free book – 6 Steps to 7 Figures; it goes over a system where it shows you how to generate a half-million dollars while working only four days a week.

Before we jump into the rules of using a self-directed IRA to invest in real estate, let’s take a look at this video that sums up what a real estate IRA is and some details surrounding it:


Rules of Purchasing Investment Properties with a Self-Directed IRA in 2024

Like most retirement accounts, there are certain prohibited transactions or rules you must follow to ensure that everything goes as planned, and is in accordance with the regulations that are in place. If the rules are not followed properly, there are consequences that will cost you. For instance, if a prohibited transaction takes place, the IRS can remove the tax-deferred status from your self-directed IRA, and, therefore, greatly increase your tax burden.

Let’s take a look at a few of the main rules investors need to keep in mind when using a self-directed IRA to invest in real estate in 2024

1. Cannot Purchase Property from Yourself or a Disqualified Person

You may not use your self-directed IRA to buy, sell, or lend to or from a disqualified individual. A disqualified person would be any of your lineal ascendants and descendants.

Ascendants would be someone who proceeded you in your direct lineage, such as your mother, grandmother, great-grandfather, and so on. Descendants would be your children, grandchildren, and the like. Examples of other individuals who would be considered disqualified would be yourself, your spouse, your employer, those who are providing plan services such as your custodian, and other advisors.

2. The Self-Directed IRA Should Hold the Property Title

When you purchase a buy and hold property with your self-directed IRA, it’s your IRA that will hold the title to the property, not you personally. This is because you and your retirement account are two separate entities. It’s essential to ensure all documentation is done properly so that it reflects your IRA as the title holder.

3. Rental Property Expenses Must be Paid from the SDIRA

If a piece of real estate was purchased through a self-directed IRA, all expenses would need to be paid directly from the SDIRA. For this reason, it’s essential to take into account the expenses that will be necessary throughout the year, and in turn, have enough funds in your self-directed IRA to cover them.

Here are just a few examples of expenses an investor may encounter:

  • Rental Property Repairs
  • Maintenance/Property Upkeep
  • Property Taxes and Insurance
  • Possible Utility Expenses
  • HOA Fees if Applicable

4. There Must be No Indirect Benefits

When an investor uses a self-directed IRA to purchase real estate in 2024, or any year, there must be no indirect benefits. All transactions should only benefit the self-directed IRA retirement account. The opposite, an indirect benefit, is one in which the investor uses their SDIRA in such a way that it benefits them personally at the present time. This would be considered an improper use of the retirement account.

An example would include the investor using the rental property as a personal vacation home, or using the garage as a personal storage space, and the like. The same rules apply when dealing with a disqualified person, such as buying property with an SDIRA with the intent to have your child or parent live in it.

5. Money Made from the Investment Should be Placed into the Self-Directed IRA

Income made through the property that was purchased with an investor’s self-directed IRA will need to go back into the account. It’s prohibited for the tenants to pay the investor directly. In other words, the investor can’t be the middle man between the tenant and the SDIRA. There are a few ways that the income can be placed in the retirement account without it going to the investor first.

Using a self directed IRA to invest in rental real estate in 2024

  1. A lease is created between the tenants and the SDIRA, and rent checks are written directly to the retirement account.
  2. A property manager is hired and rental checks are made out to him/her, and in turn, the money is deposited in the retirement account.
  3. There is an SDIRA LLC structure where the property is under the ownership of the LLC, and therefore, rental checks are made out directly to the LLC.

How to Use a Self-Directed IRA to Invest in Real Estate in 2024

If you would like to move forward but you’re not sure how to use your self-directed IRA to buy real estate, we can provide you with a few tips to make it happen. We will cover two different approaches: 1.) Only working with your SDIRA custodian. 2.) Having a full-service real estate company take care of all the details for you, including filling your new rental property with tenants.

Let’s find out how to use your self-directed IRA to invest in real estate in 2024:

1. Choose a Specialized Self-Directed IRA Custodian

If you’re reading this article, you most likely have a 401k retirement fund, or a regular IRA that doesn’t allow for investing in real estate. With that said, the first step would be to find a self-directed IRA custodian. An SDIRA custodian is much like the custodians you are accustomed to if your IRA account was held at, let’s say, Fidelity or Vanguard. The difference is that specialized self-directed IRA custodians allow for, and understand the complexities of investing in real estate with an SDIRA.

Most brokerage firms and investment advisors won’t talk about the possibilities of switching to an SDIRA and investing in real estate; they want to keep it a secret. We put together some information that exposes why they won’t bring this fact up to their clients in our Why Financial Advisors Don’t Talk about Self-Directed IRAs podcast. 

Here are a few tips on how to find a good self-directed IRA custodian:

  • Do a thorough search for SDIRA custodian reviews, as well as ask established investors if they can recommend one.
  • Confirm that they are actually a custodian and not simply a facilitator or administrator.
  • Make sure the custodian specializes in real estate, and that they have a large portfolio that demonstrates their experience level in this type of investment.
  • Request 2024 self-directed IRA tax rules to see if they are up to speed with the latest regulations and tax laws.

2. Begin the Process of Moving to a Self-Directed IRA

You and your custodian can now open your new self-directed IRA and place money into it with a rollover, transfer, or contribution. Your custodian will know which way of moving your funds is appropriate for your retirement account situation.

3. Vet the Rental Property You Want to Invest in to Ensure it’s a Lucrative Deal

Now that you are set up to invest in real estate with your self-directed IRA, the next step is to find a property worth investing in. It’s crucial to only invest in buy and hold properties that you know will grow your retirement funds.

There are a few things to look out for when vetting a property, but investors often do a quick evaluation before jumping into the research aspect of it. They do this with what’s called the 1% rule of real estate investing. It can save you not only time, but also thousands of dollars. We created an article that explains how to use the 1% rule, and its benefit to rental property investors.

Once the 1% rule has determined that the property is worthy of further evaluation, it’s important to take note of the following:

  • Does the neighborhood appear to be in good shape?
  • How is the crime in the area – low or on the rise?
  • How does the rental market look? If you’re not familiar with this subject, we created a detailed write-up on what makes for a hot rental market.
  • Are the values of the homes in the area appreciating or depreciating?
  • Is the property in decent shape?
  • What is the going rate for rentals in the area?
  • Does your research show that the area seems to be prone to vacancies?
  • Has the property been on the market long?

You can also run the property through DealCheck’s property analyzing software to find out if it’s a profitable deal or not. We always use this software before we move forward with a deal.

4. Work with the Custodian to Move Forward with Buying the Investment Property with Your Self Directed IRA

Now that you have located a piece of real estate that you would like to purchase through your self-directed IRA, it’s time to move forward on the deal. To do this, you will need to get approval from your custodian. Sometimes, it can take a bit of time, causing a potential deal to be lost from not jumping on it fast enough. Because of this, it’s imperative to stay on top of things in regards to your custodian.

Once approved, you may make an offer on the property in the name of the self-directed IRA. If accepted, the property goes into escrow. If everything moves forward in the investor’s favor, all the necessary documentation is filled out and signed by the custodian, which is the signatory on all the paperwork on behalf of the SDIRA. At this point, the deal moves through just as a normal property purchase would.

It’s worth mentioning that if you have an SDIRA LLC structure, then you will not have to get approval from your custodian on which investment you can move forward with, and can use your check writing privileges to purchase the property.

An Easier and Faster Way to Invest in Rental Properties Using a Self-Directed IRA

Owning a lucrative rental property is very rewarding, but you have to get to the point of owning it, and that can be confusing for someone who is new to the game. Even when dealing with a custodian, the process is not that simple.

Our customers take the most profitable, efficient, and less complicated route by utilizing our services for every aspect of the deal, from start to finish. Let’s take a look at how a situation like this works:

A Real Estate Company That Specializes in Investing with Self-Directed IRAs Can Get You Set Up with a Cash Flowing Rental Property

If you want to invest in real estate using your self-directed IRA in 2024, but you’re not familiar with the whole process, a full-service real estate company, such as Morris Invest, can take care of all the details for you, and make it a reality.

A professional rental property investment company can remove the confusion, stress, and hassle that would occur if the investor was trying to do it on their own. Additionally, an experienced turnkey real estate company will also ensure that the investor does not make costly mistakes in the process.

A full-service investment company can easily set up your self-directed IRA in 10 minutes. This is possible because our company has years of experience, and has a team of professionals who specialize in investing in real estate with self-directed IRAs.

The bottom line is, we can get you set up with a cash flowing rental property in 2024. We can even place your tenants for you. Let’s take a look at what Morris Invest has done for its customers who wanted to use their self-directed IRAs to invest in real estate:

  • Set up your self-directed IRA for you and match you up with a trusted custodian.
  • Help set up an SDIRA LLC structure, if desired. This provides you with more control over your assets and funds, along with money-saving tax benefits, and liability protections. You can get extra protection for your properties by reaching out to Scott Smith from Royal Legal Solutions. He can put certain strategies in place to safeguard your rental properties to the greatest extent, as well as lower your taxes.
  • Consult with you to fill you in on how the whole process works when investing in real estate with a self-directed IRA.
  • Conduct market research for you to make sure your investment property is located in an area that will maximize your rental cash flow.
  • Morris Invest specializes in providing buy and hold properties such as single-family housing and multi-family duplexes.
  • We can provide investors with exceptional new construction properties.
  • Our new construction rental properties come with a full cost segregation analysis that can lower your overall tax burden. We created a detailed write-up on what a cost segregation study is, how it works, and how much money it allows you to keep in your pocket. See our post on the topic: The Power of a New Construction Cost Segregation Study Can Save You Thousands.
  • We place an experienced property manager for you.
  • Tenants are placed in your rental property, so you are immediately set up to receive monthly rental checks.
  • We provide professional advice, as well as suggest real estate investing tools to make things easier on you. Here is an article that we put together with some quality real estate investing tools and resource suggestions.
  • We can also direct you to the insurance company that our clients use that have experience in covering rental properties, the company is National Real Estate Insurance Group.

Investing in real estate with a self-directed IRA has many moving parts to it, but the good news is that you don’t really have to worry about it all; we can take care of all the details for you.

This will provide you with a cash flowing rental property that will grow your retirement funds beyond what you had imagined.

If you would like to discuss the possibility of investing in real estate with an SDIRA, we would be happy to speak with you. You can contact Morris Invest and schedule a free call with one of our self-directed IRA experts to get the ball rolling.

How to Use a Self-Directed IRA to Invest in Real Estate in 2024 Commonly Asked Questions

At Morris Invest, we often receive calls pertaining to investing in real estate with SDIRAs. On these calls, our customers ask some great questions. We would like to share a few of them with you to broaden your knowledge base on the subject.

1. Is a Self-Directed IRA a Good Idea?

Using a self-directed IRA is a good idea because it provides the investor with more control over their retirement funds, and allows for alternative investment options. This, in turn, adds diversification to their portfolio. A self-directed IRA also protects the investor’s funds during times of economic downturns, as well as maximizes their savings with tax-deferred earnings.

2. Can I Use a Self-Directed IRA to Purchase Real Estate?

Yes, self-directed individual retirement accounts allow for the purchase of real estate. However, the real estate must be for investment purposes only. Additionally, the income generated from the property will need to be directed back into the self-directed IRA to avoid breaking the rule of no indirect benefits. Qualified real estate purchases can include single-family and multi-family homes, apartment buildings, mortgage notes, and more.

3. How can I use my 401k and IRA to invest in real estate?

You can use both your 401k and IRA to invest in real estate by moving your IRA funds over to a self-directed individual retirement account through a custodian that allows for such an investment. Your custodian will proceed to roll over your 401k to the self-directed IRA. Once all the funds from the 401k and IRA are in an SDIRA, the account is now eligible for real estate investments.

4. How much money can you put in a self-directed IRA?

For the year 2024, your total self-directed individual retirement account contributions cannot be more than $6,000 if you are under the age of 50, and $7,000 for those who are age 50 or older.

Power Resources for Real Estate Investors

We Can Set Up Your Self-Directed IRA and Provide You with a Lucrative Cash Flowing Rental Property!

If you currently have a 401(k) or regular IRA, then you are already ahead of the game. The next step is easy, just contact Morris Invest by booking a free 30-minute call, and we will take care of the rest. We can create your self-directed IRA in 10 minutes, and move your other retirement account funds into the SDIRA, start showing you available rental properties, and set you up to receive rent checks every single month.

Using a self-directed IRA puts you in the driver’s seat by giving you control of your own money, and allows you to build great wealth that you can comfortably retire on.

Before you go, you will definitely want to view this video that reveals 5 self-directed IRA tips that will make you rich during the 2024 recession:

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